Laws Needed to Curb E-Fencing of Retail Products

I got a call recently from Brian Scanlon, vice president of loss prevention at Wegmans Food Markets, Rochester, N.Y., who wanted to know if I was covering the organized retail crime (ORC) issue. “This is a huge issue,” he said. “And the industry is not mobilized enough.”

More than just common shoplifters, ORC rings are predators who continuously steal products that can be readily fenced at flea markets, pawn shops, street corners and online. Some of the most targeted objects of ORC — infant formula, OTC drugs, beauty products — are carried by supermarkets. Total annual retail losses attributed to ORC range between $15 billion and $30 billion, said Joseph J. LaRocca, senior asset protection advisor, National Retail Federation, Washington.

ORC has thrived in a recessionary climate in which many consumers are forced to look for the extreme bargains supplied by ORC rings. Nearly three-quarters of 115 retailers (73%) who responded to a recent NRF survey reported that ORC activity has increased over the past year.

The Internet — notably online auction sites like eBay — has become one of the prime avenues through which ORC rings fence their ill-gotten goods. Unlike pawn shops and flea markets, the Internet, noted LaRocca, represents a largely unregulated “Wild West” opportunity for retail criminals, who can avoid face-to-face contact with buyers.

Shortly after the NRF survey was released earlier this month, eBay released a series of statements defending its practices. “We devote substantial resources to monitoring our marketplace and have zero tolerance for criminal activity,” said Tod Cohen, eBay's vice president and deputy general counsel for government relations. Cohen also referred to an eBay program called Proact, in which eBay partners with retail loss prevention departments. He criticized retailers who “unfairly blame the Internet” as the cause of the ORC problem and slammed the NRF ORC survey as being “filled with best guesses.”

The NRF's LaRocca, however, countered that eBay refuses to provide retailers with the names, addresses and email addresses of eBay sellers suspected of e-fencing on eBay, though it will share that information with law enforcement. “Retailers should have the ability to look at seller [data] and figure out if this is a problem or not before having to go to law enforcement for support,” he said.

EBay's decision to withhold seller information is based on “privacy concerns,” said eBay spokesman Paul Jones.

The issue could be resolved this year by federal legislation. Three bills are pending, two in the House and one in the Senate. Among their provisions, the bills would require operators of online auction sites to cooperate with retailers as well as law enforcement officials in ORC investigations, and, in some cases, would hold auction sites responsible for the sale of stolen merchandise that could have been prevented.

Regulation certainly seems necessary to make it harder for illegally obtained merchandise to be sold online. Let's hope Congress acts this year.